- USD/CAD falls 100 points on Tuesday, extending its weekly losses to almost 2%.
- Broad US dollar weakness and high crude oil prices undermine USD/CAD, a tailwind for CAD.
- The US economy is slowing down as the Fed wants, as can be seen from the JOLTs report, which disappointed estimates.
- Fed policymakers continue to insist on the need to hike rates amid recent US data showing the economy is slowing.
The USD/CAD extended its losses for two consecutive days, thanks to a softer US dollar and rising oil prices, which supported the commodity-linked Loonie amid a risk boost.
Therefore, USD/CAD is trading at 1.3553 after reaching a daily high of 1.3664 around the 200 hourly EMA before the major currency fell towards the 1.3530 area.
On Tuesday, investor sentiment improved. US economic data released by the Labor Department reported that job openings fell from about 11.239 million in July to 10.053 million in August. Meanwhile, the US Commerce Department revealed that August factory orders were unchanged at 0%, following July’s 1% drop.
Following Monday’s ISM, the PMI reported that manufacturing activity slowed but remained in expansion territory. The sub-components showed that the price index fell, while new orders started to fall.
A series of Fed officials, led by New York Fed President John Williams, have made statements since yesterday. Williams asserted that the Fed’s job is “not done yet”, while adding that policy is “not in a restrictive place for growth yet”, stressing the need to raise rates.
Atlanta Fed President Raphael Bostic said supply chains are pushing prices higher, while Richmond’s Barkin said a strong dollar has potential spillover effects on the global economy, but stressed that the Fed It is focused on the US economy.
Lately, Mary Daly of the San Francisco Fed said that the Fed is committed to reducing inflation and echoed comments from the New York Fed’s Williams about the need for additional rate hikes. .
Meanwhile, one of the Fed’s most recent board members, Philip Jefferson, said: “Restoring price stability may take some time and will likely involve a period of below-trend growth.”
Apart from this, the unreported Canadian economic data left USD/CAD traders adrift on the US dollar and commodity price dynamics. The Dollar Index is falling after reaching a yearly high at 114.77, although it is down 1.27% to 110.246.
By contrast, US crude oil prices rose on speculation that OPEC+ could cut global oil production by as much as 2 million barrels a day. Hence, WTI jumped and reached a daily maximum around $86.95, far from the $87 signal, with a rise of more than 3.60%. The cartel is scheduled to meet on October 5.
Therefore, USD/CAD continued its downtrend, although it has recently bounced from the lows around 1.3521 towards the daily pivot point S1.
What must be considered
Building permits and the trade balance will be released on the Canadian docket on Wednesday, followed by a speech from Tiff Macklem of the Bank of Canada (BoC) on Thursday. In the US, the calendar will reveal the S&P global PMIs and the ADP employment change report, along with the Fed’s speech.
USD/CAD Key Technical Levels
Source: Fx Street
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